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Brazil's Emergence on the Global Scene Brings Challenges

Point of View column, Centerpoint, May 2008

May 01, 2008

Two decades of democracy and 14 years of economic stability and social gains have placed Brazil closer to fulfilling its enormous national potential. This time, unlike the short-lived GDP rise the country experienced under the military regime in the late 60s and early 70s, there is no Brazilian miracle at work.

Reforms have made Brazil more resilient to external shocks. Growing demand for its mineral and agricultural commodities from China and developing nations, as well as an expanding domestic market, have combined to sustain higher rates of economic growth. Recent findings of huge oil and gas reserves offshore may turn Brazil into a top global energy producer. And this in a country that is already a leading food exporter and has developed the only sustainable, industrial-scale production of a biofuel—sugarcane ethanol—using just 1 percent of its arable land, thousands of miles away from the Amazon.

On the political front, after a few missteps, Brazil has gained greater international prominence as President Luiz Inácio Lula da Silva has carefully recalibrated the country's diplomatic strategy back toward its tradition of pragmatism. Guided by its national interest of preserving stability in South America, Brazil has, for instance, acted to contain the exuberance of Venezuela's populist President Hugo Chávez.

Success, however, has brought new challenges. Brazil's renewed economic dynamism is constrained domestically by the poor quality of education and insufficient training of its labor force. Antiquated labor laws and an unfavorable climate for business are compounded by the burdensome and expensive public sector, which is supported by a regressive tax system that consumes close to 40 percent of the nation's GDP.

None of Brazil's challenges, however, looms larger than preserving the Amazon rainforest. The forest is home to Earth's greatest concentration of living species and one of the world's largest reservoirs of fresh water. Some 83 percent of the original forest still remains and the pace of deforestation has slowed, despite a spike in 2007. The Amazon also serves as a tropical reactor that governs rain patterns over central and southern Brazil. Abundant rain ensures highly productive agriculture and replenishes the reservoirs of hydropower plants that produce some 80 percent of the country's electricity, further demonstrating the importance of this economic and environmental treasure.